Once the great hope of an Alberta government looking to get in on the ground floor of the cellphone industry, Calgary-based NovAtel Inc. has agreed to a $390-million (U.S.) friendly takeover proposal from one of its principal clients, Hexagon AB of Sweden.
Founded in 1978 during Peter Lougheed's tenure as Premier of Alberta, the global navigation satellite technology firm started off as a joint venture between energy giant Nova Corp. and the province's telephone company, Alberta Government Telephones, as part of the Conservative government's vision to diversify the province's economy and anchor its growing high-technology industry.
However, over the next 19 years, the company slipped in and out of government hands, suffered numerous setbacks and eventually cost taxpayers more than $600-million (Canadian) before it was torn apart and sold in pieces.
What remained after all was said and done was a highly profitable business unit that specialized in global navigation satellite system (GNSS) components and subsystems. NovAtel's receivers, antennas and "firmware" are integral pieces of the national aviation networks in the U.S., Japan, Europe and China.
The deal with Hexagon is a great fit for both companies, according to NovAtel president and chief executive officer Jon Ladd.
Hexagon already owns NovAtel's largest client, the Swiss spatial technology firm Leica Geosystems, and plans to make NovAtel products key components as it moves further into the machine control industry.
"We've got a lot of our eggs in Leica's basket and, quite frankly, Leica has a lot of their eggs in our basket," Mr. Ladd said.
Hexagon approached NovAtel with the proposal and there were no other interested buyers who came forward, Mr. Ladd said. However it will take a number of weeks for the deal to be completed, which means there could be time for another buyer to step up.
"Both management and board of directors believe [$50 U.S.]is a very compelling price and are supportive of the deal," he said in an interview with The Globe and Mail. "We believe this is the best deal for NovAtel shareholders."
News of the proposal sent NovAtel's stock soaring on the Nasdaq Stock Exchange Friday, with shares rising more than 17 per cent.
The deal is the latest in a string of mergers and acquisitions, as technology firms jockey for position in the high-growth global positioning industry. Last week, Nokia Corp., the world's biggest cellphone manufacturer, announced an $8.1-billion (U.S.) deal to purchase digital map information firm Navteq Corp. and earlier this summer, TomTom NV, the world's largest producer of in-car GPS systems, shelled out $2.9-billion to acquire Navteq's chief rival, Dutch firm Tele Atlas NV.
"Whenever you have a fast-moving, large-growth market and you have a lot of different niche players, I think it's a fairly standard evolution that a lot of the larger players want to broaden their reach," Mr. Ladd said.
In 1989, Nova sold its half of NovAtel to AGT for $42.5-million (Canadian). The following year, AGT was privatized and became Telus Corp. At the time, NovAtel predicted big profits for the second half of 1990, but the company ended up losing more than $4-million and nearly sank Telus's privatization plans in the process. This prompted the province to step in and agree to backstop Telus and buy NovAtel if necessary to salvage the share issue.
Telus sold NovAtel back to the provincial government for $159.4-million, touching off a string of unsuccessful quarters in which the company incurred major losses.
In March of 1991, the company reported losses of $204-million for 1990, laid off more than 600 employees over the course of the year and mothballed a $30-million state-of-the-art manufacturing plant in Calgary as it attempted to restructure itself.
In May of 1992, the provincial government, fed up with millions of dollars in losses, dumped NovAtel's systems business to Northern Telecom Ltd. - now Nortel Networks Corp. - for $38-million and offloaded the company's cellphone manufacturing business to Telexel Holding Ltd. for $3-million plus $5.8-million in receivables, thereby keeping the company's GPS technology division intact.
At the time, the province admitted to losing $566-million on the deals to break up the company. Later that year an Auditor-General's report slammed NovAtel's management team, decrying the company's policies, product development, and marketing and finance practices.
The remainder of the company was taken public in February of 1997, according to a NovAtel spokeswoman.